The Senate and the Nigerian Governors Forum (NGF) have taken differing positions on the latest regulation by the Nigeria Financial Intelligence Unit (NFIU) that intends to reduce vulnerabilities created by cash withdrawals from Local Government Funds.
The regulation, effective from 1st June 2019 bans transactions on State and Local Governments joint accounts. This means that funds will go directly to the accounts of local governments. It also limits cash withdrawals from local governments accounts to a maximum amount of N500,000 per day with penalties for banks who fail to comply.
While the Nigerian Governor’s Forum (NGF) has described the regulation as unlawful, the Senate has supported the move of the independent agency whose mandate include tackling money laundering, the financing of Terrorism and its proliferation.
The NGF (comprising of the 36 State Governors) have argued that the Guidelines are in breach of s.162(6) of the 1999 Constitution (as amended) which provides for the creation of the States Joint Local Government Account (SJLGA). This account is expected to contain all allocations to the Local Government Councils of the State from the Federation Account as well as allocations of State government. The NGF also argues against the applicability of the Guidelines on the basis that local government councils are a creation of the Constitution and not reporting entities like financial institutions.
Section 162(6) which the NGF hinges its arguments is replicated below:
162(6) Each State shall maintain a special account to be called “State Joint Local Government Account” into which shall be paid all allocations to the Local Government Councils of the State from the Federation Account and from the Government of the State.
Nonetheless, the NFIU claims that the joint account system currently in use by State and Local Governments should exist only for the receipt of allocations from the Federation Account and not for the disbursement of its funds. It however failed to state which provision of the Nigerian Financial Intelligence Unit Act, 2018 that its guidelines were pursuant to.
The NGF, which has now resorted to writing President Buhari to stop NFIU from enforcing this provision, holds a different view from the majority of Senate lawmakers who passed a resolution championing the NFIU’s guidelines and its implementation by financial institutions.
The Senate also urged States who either stepped down or deferred consideration on the Constitution alteration Bill recognising local government autonomy to pass the Bill in view of its huge dividends to democracy and governance at the grass roots.
There is no doubt that there is nationwide worry about the manner that State Governors interfere with the use of Local Government Funds. It will be recalled that the National Assembly had passed the Constitutional amendment bill proposing local government autonomy as an independent tier of government in July 2017. However, the amendment, failed to get the required vote when transmitted to State Houses of Assembly for voting and adoption in line with section 9(2) of the 1999 Constitution (as amended).
The Bill proposing Local Government autonomy also sought to delete section 7(6) of the 1999 Constitution (as amended) which provides for the National Assembly and State Houses of Assembly to make provisions for statutory allocations of public revenue to local governments.